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Political competitiveness and the private–public structure of public expenditure: a model and empirics for the Indian States

Stanley Winer (), J. Stephen Ferris (), Bharatee Bhusana Dash () and Pinaki Chakraborty ()
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Bharatee Bhusana Dash: Xavier University
Pinaki Chakraborty: National Institute of Public Finance and Policy

International Tax and Public Finance, 2021, vol. 28, issue 6, No 7, 1430-1471

Abstract: Abstract Studies of government size usually try to identify the factors that explain what parts of economic activity are brought within the public sector and what parts are left strictly in private hands. Modern governments are now so large that the question of what determines the private/public composition, or privateness, of public expenditure is of comparable importance for understanding the role of government in society. In this paper, we use a model of the composition of public budgets to uncover the importance of electoral competitiveness and other factors in the evolution of the privateness of public expenditure across the Indian states. These states vary widely in their socioeconomic characteristics while sharing a common political heritage based on parliamentary government. New measures of public expenditure on private targetable goods and of electoral competitiveness at the Indian state level accompany the paper along with a primer on Indian public finance accounting practices in an Online Appendix. The empirical analysis shows that the degree of privateness in India’s more developed states falls substantially with greater political competition and with rising incomes, while in the less developed states it responds more weakly to these key factors and in some cases even inversely.

Keywords: Private/public good composition of government expenditure; Targetable private goods; Electoral competitiveness; Core versus swing voter; Pooled mean group estimation; Indian states (search for similar items in EconPapers)
JEL-codes: D7 H3 H4 H7 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s10797-020-09642-1

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